What is the outlook for the 2nd half of the year?

The crystal ball for the 2nd half of the year remains hazy with markets likely to be choppy in the near term. A key catalyst which may change our view is when the situation in Europe reaches a firm conclusion, be it a Greek/Spanish default leading to the collapse of the European Union in the worst case scenario or a sizeable bailout which will ring fence the danger of indebted nations going under. Until then, markets will continue to muddle along and run in circles. Over in Asia, there are concerns if China can engineer a soft landing as it transitions from an export-led to a domestic consumption-based economy. Another potential flashpoint is the price of oil; that threat seems to have eased somewhat recently but there is no telling when tensions in the Mid-East with Iran and Syria will flare up again. As an open economy, Singapore is extremely vulnerable to these external trends as reflected by the sluggish export figures. Labour constraints and wage pressures may also eat into corporate earnings. In short, there are several headwinds that could make things worst before it gets better, hopefully towards the end of the year.